RE:RE:RE:RE:Nov 8/2017: UEX/CoEX: 9.94% Co and 2.97% Ni over 0.2 metres-The private placement can be seen as doing a couple things - but it mostly provides security to UEX and acts as a bit of an additional sweetner for UEC.
If the deal goes through with UEC as is, then it doesn't really matter. In a flat market it is an in and out, they pay $0.43 and then exchange shares at a similiar ratio so get back their own cash. Funny enough, because the market absolutely tanked the week the deal was announced - the cash amount per share they are paying is much higher then implied by the share prices.
For UEX, if for some reason the deal were to fall apart, well the result on UEX share price would likely be catastrophic - immediately losing the 50% premium, and probably a lot more as it shows a loss of market interest. In that case, better to have an extra $5 million in cash then need to have to go to market anytime soon. Yes UEX said it had enough cash through the end of the year, but if the deal were to not close we would be in August and they would be close to needing to raise cash to support next year's budget.
Lastly, for UEC - this provides a sweetener. If there are no alternative bids, then now owning abotu 2% of the Company it gives them a decent chunk of likely voting shares that would vote in favour of the deal. Think of this as offsetting some investors that might vote against this deal thinking since it is below whatever hypothetical targets they have in mind (I don't understand this viewpoint - for all the talk of not selling to the US or them being a bully, if no other offer comes in the next month or so, then no better offer is likely ever going to come). This private placement does not let them steamroll through the deal though, trust me, if a clearly superior offer comes in they only own 2% of the shares so undoubltely enough institional and retail shareholders would vote for that offer. Heck, even UEC would benefit - if hypotetically a Cameco or Denison ups the offer 50%, then UEC makes a quick $2.5 million on their private placement in addition to potential termination fees. Lastly, UEC does have the right to match any other bid - so at least for a small piece of this deal they are locked in at $0.43/share.
I don't know UEC well myself and need to do more due diligence, I still don't know if I would stick around as a UEC shareholder. What I do know is that UEX has a lot of properties, generally with deep deposits or that will require a lot of cash to further develop. The path to doing that will be a lot faster under a UEC, for example UEC could probably fund the development of the Cobalt property into a economical 10 million pound resource for just a few million $ with the equalivent of pocket change for them. Whereas for UEX, it would have required dilution and probably more time then we had the patience for. Yes it will move the needle less for a much larger company, but at least these assets will finally start to move and be developed. UEX problem was always it had too many assets to manage for the size of the Company, and with the inflation and bear market the costs to do so were only going up.